Egypt’s economy showing signs of recovery: IMF

RIYADH: Egypt’s economy is showing signs of recovery, as the government’s recent efforts to restore macroeconomic stability have started to yield positive results, the International Monetary Fund said. 

In its latest review report, the IMF said that the inflation rate in Egypt remains elevated but is coming down. 

The North African country has been implementing several economic reforms to maintain fiscal stability, which includes the unification of the official and parallel exchange rates in March. 

Since then, the country’s economy has improved significantly, with the Egyptian pound becoming market-determined, the foreign exchange backlog at banks eliminated, and daily interbank global exchange turnover increasing. 

“The unification of the exchange rate and the accompanying monetary policy tightening have curtailed speculation, brought in foreign inflows, and have moderated price growth. With signs of recovery in sentiment, private sector growth should be poised for a rebound,” said Antoinette Sayeh, deputy managing director and acting chair at the IMF. 

She added: “A sustained shift to a flexible exchange rate regime and a liberalized foreign exchange system, continued implementation of a tight monetary policy stance, and further fiscal consolidation coupled with proper implementation of the framework to monitor and control public investment should support internal and external balance.” 

The international financial institution added that the country is facing hurdles in implementing the ongoing reforms due to geopolitical issues like the conflict in Gaza and tensions in the Red Sea. 

“Risks remain significant. Regional conflicts and uncertainty about the duration of disruption of trade in the Red Sea are important sources of external risk. Maintaining appropriate macroeconomic policies, including a flexible exchange rate regime, would help ensure economic stability,” added Sayeh. 

The report highlighted that ongoing fiscal consolidation efforts in Egypt will help place public debt on a decisive downward path. 

“To ensure that resources are still available to meet vital spending needs to help Egyptian families, including on health and education, particular attention will be needed to strengthen domestic revenue mobilization and contain fiscal risks from the energy sector. This will also assist in generating some fiscal space to expand social spending in support of vulnerable groups,” added the IMF. 

Sayeh also suggested several implementations that could boost the economic stability of Egypt in the future, including a structural reform agenda and measures that increase tax revenues. 

She added that restoring energy prices to their cost recovery levels by December 2025, including retail fuel prices, is essential to supporting the smooth provision of energy to the population and reducing imbalances in the sector. 

The report further said that the banking sector in Egypt remains stable and that financial institutions in the country could achieve profitability and have sufficient capital liquidity. 

The IMF added that it has softened several conditions of its $8 billion financial support package to Egypt, including allowing Cairo more time to implement reforms. 

In the latest review, approved in late July but published on Aug. 26, the IMF said that it agreed to delay the publication of Egypt’s annual fiscal account audits by its Central Auditing Organization until the end of November from the original end of March.